Pension officials have said the Kansas Public Employees
Retirement System has about $38 million invested in
companies with ties to Sudan, the largest amount being $16
million in PetroChina, a Chinese oil firm, according to the
AP.
The law prohibits the state pension fund from investing in
certain businesses and requires it to divest from direct or
indirect holdings in companies with Sudan operations.

Legislative Response

State legislatures have responded to the divestiture
campaign, with Illinois being the first state to pass
legislation requiring public pension funds to divest from
Sudan. However, in February U.S. District Judge Matthew
Kennelly of the U.S. District Court for the District Of
Illinois ruled that the portions of a divestiture law that
placed those restrictions on pension investments in
Illinois violated the federal government’s right to
regulate foreign commerce (see
Court Blocks Illinois Sudan Law
).

Maine, Connecticut, Oregon, and New Jersey have embraced
similar divestiture legislation, while California,
Massachusetts, New York, Vermont, Indiana, Ohio, Maryland,
Colorado, Rhode Island, and Los Angeles either have passed
or are considering divestiture legislation as well.
Pension fund managers, however, take a dim view of
divestiture legislation (see
Doing the Right Thing?
), and in April the California State Teachers Retirement
System’ (CalSTRS) withdrew its backing for divestment
legislation (See
CalSTRS Opposes Broad Investment Bans
), saying that sweeping investment bans could hurt
investment returns and cost the fund money – after calls
emerged for California funds to pull their investments in
firms doing business with Iran.

The Impact

In theory, Sudan divestiture should not affect plans’
domestic investments. In 1997, Congress passed sanctions
that prevented U.S. companies from doing business in Sudan
because of its support of terrorism. However, while federal
law prohibits U.S. firms from doing business in Sudan, no
such restrictions apply to foreign firms. State pension
funds are permitted to invest in foreign firms, subject
only to limits set by state legislatures.

Some critics argue that forcing funds to divest money in
companies with ties to the Sudanese government could cause
fiduciary problems by allowing an agenda other than getting
the highest returns for investors to guide investment
decisions (See
Public Pension Fund Divestment: A Fiduciary Risk?
).